Equity MFs push new offers amid market rally

33 new fund offers launched this year, the most in six years

With Indian stock indices scaling new highs, new equity launches by the country’s mutual fund industry is gaining traction. So far this year, fund houses have launched 33 new fund offers (NFOs) in the equity category, the most since 2008, when 41 new offers had been made.

Launch of NFOs had taken a severe beating after the stock market crash of 2008. A revival of investor interest in mutual fund houses’ equity offerings is an encouraging sign for the Rs 10-lakh-crore industry.

Fund houses have been able to mop up over Rs 3,500 crore from investors through new offerings so far this year.

“We have noticed fresh investors entering the market through our close-ended NFOs. The increase in equity assets is on account of incremental allocation by investors, who had been underweight on this asset class in the past few years,” said S Naren, chief investment officer (CIO), ICICI Prudential Mutual Fund.

In the past few years, new offerings had lost flavour and the MF industry faced challenges in garnering new assets amid poor market sentiment. In 2012, the industry was able to launch only eight NFOs, which cumulatively mobilised only Rs 500 crore.

The tide now seems to be turning as the new offers are getting good response and money is flowing into the existing schemes as well.

Out of the 33 equity NFOs that have hit the market this year, 21 have been close-ended products with lock-in periods between three and five years. Among the fund houses that came up with these launches were ICICI Prudential AMC, Reliance Mutual Fund, Birla Sun Life MF, Sundaram MF and L&T MF.

The bulk of money has flown into close-ended products, where investments are done for a fixed period. In absolute terms, of the Rs 3,580 crore of fresh mobilisation through NFOs, Rs 2,685 crore came through close-ended equity schemes. Industry experts said the trend was likely to continue, as an improved sentiment was turning the overall market bullish, especially after a stable government under Narendra Modi taking charge at the Centre.

Niranjan Risbood, director (fund research), Morningstar India, said: “The markets have improved and people are willing to put in fresh money. Since a majority of these funds are close-ended in nature, with much better commissions, distributors are also pushing these products. I see this continuing, as new launches are an easy way to get money in a rising market in India. There will be more such funds coming with lock-in periods going forward.”

Data for August from industry body Association of Mutual Funds in India (Amfi), due in a few days, is likely to confirm this trend, say industry players.

About a fourth of the assets of the mutual fund industry is in the equity segment. In absolute terms, there are about 380 equity schemes, with total assets of about Rs 2.51 lakh crore.